2 Beaten-Down Dividend Stocks to Buy and Hold

There are plenty of good reasons to invest in dividend stocks. Companies that can sustain increasing payouts for a while probably have strong underlying operations. Automatically reinvesting the dividend will help boost returns over long periods. And, as with all equities, purchasing shares of top income stocks on the dip is even better.

Here are two brilliant options along those lines: CVS Health (NYSE: CVS) and Bristol Myers Squibb (NYSE: BMY). Find out why, despite the issues they've faced, both of these healthcare dividend stocks are attractive to investors focused on the long game.

1. CVS Health

Slow revenue growth, inconsistent net income, and multiple guidance cuts -- that's what CVS Health's shareholders have had to deal with for the better part of two years. The company saw sales from coronavirus-related products drop, while its Medicare Advantage (MA) business racked up unexpectedly high costs.

The third quarter wasn't very different; revenue increased by 6.3% year over year to $95.4 billion. Adjusted earnings per share dropped to $1.09 from the $2.21 reported in the prior-year quarter.

Dwindling revenue from COVID-19 test kits was predictable, but CVS needs to find a solution to its Medicare Advantage business problem to get back in the good graces of investors. The company is working on that project, and management promised to restructure the business next year in ways that could lead to it losing some 10% of its MA members but also becoming more efficient.

The good news is that the company still has key advantages. It offers diversified and complementary services throughout patients' care journeys, from primary care to health insurance and medicines. CVS is in dozens of communities around the U.S., and millions of people have relied on its services for decades. That sort of entrenched position in an industry as trust-focused as healthcare won't disappear quickly. So, provided it can resolve its MA business issues, the company should be fine over the long run.

CVS Health is still proving its versatility. Last year, it launched a subsidiary called Cordavis focused on developing generic and biosimilar medicines, a potentially lucrative endeavor considering the massive ecosystem of patients it already serves and the fact that most people in the U.S. believe the price of drugs is unreasonable. There should be demand for precisely the kinds of cheaper options Cordavis will develop. It won't be just those, either; many of CVS Health's services will be in higher demand with an aging population.

What about the dividend? The forward yield is currently 4.8%, while the company has raised its payouts by 90% in the past 10 years. It might be facing issues, but CVS Health should remain a reliable dividend payer for a while.

2. Bristol Myers Squibb

Bristol Myers Squibb recently went through a period of declining sales following the loss of exclusivity for Revlimid, a cancer drug that used to be its top-selling medicine. The company has recovered, partly thanks to newer approvals. In the third quarter, revenue increased by 8% year over year to $11.9 billion -- a respectable performance for a pharmaceutical giant. Adjusted EPS decreased by 10% to $1.80, but that was because of expenses related to recent acquisitions, so it's not a cause for concern.

While its performance was pretty decent, BMS still faces some uncertainty, which explains why many investors remain skeptical. The drugmaker will encounter patent cliffs for two of its best-selling medicines by the end of the decade: anticoagulant Eliquis and cancer medicine Opdivo. Combined, these two products made up 45% of the top line in the third quarter, so it's a legitimate worry.

Still, BMS has proven it can overcome patent cliffs, just as it did with Revlimid. The company's portfolio of new approvals features medicines whose sales will grow at a good pace well into the next decade.

Furthermore, BMS will develop new drugs. The company's pipeline features 51 compounds in development across several therapeutic areas and dozens of potential indications. Continuously developing novel drugs is one of the most important things a pharmaceutical company can do to remain successful -- and Bristol Myers Squibb excels at this exercise.

Its business should be strong enough to support its dividend program. The forward yield recently topped 4.4%, while its payouts have grown by more than 62% over the past 10 years. Bristol Myers Squibb remains a solid income stock.

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bristol Myers Squibb. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.